Thompson & McCarty, P.C. CPA

I recently had a client that had an issue with the IRS. This is their story and how it all turned out. The very start of the story began with us making a mistake on their 2006 tax return. We left a zero off of a deduction that cost the taxpayer a substantial deduction. The return had been transmitted before the taxpayer discovered the error. The balance due on the original return had not been paid. In our defense, the deduction was verbally stated and undocumented to us so it was impossible to discover the error with our review process. There is a lesson in that, but I digress.

We filed an amended return and thought all was well. It was not. The IRS processed the check that went in with the amended return but not the amended return. They billed the client for the amount due on the original return. The client promptly called the IRS and was told that they never received the amended return. The client responded by mailing them a second copy. This would have been the appropriate time to discuss the cleared check that went in with the amended return. It was a missed opportunity to actually get good help from the IRS. They are always more helpful when you can prove that they have made an error. So this was an important missed opportunity.

Some time later, I am not sure how long because I was not involved at this point, the client received a second bill for the original return and called the IRS again. The IRS said it still did not have an amended return and suggested that they mail it a third time. They did what they were told and waited. This was a second missed opportunity.

In May 2008 the taxpayer received a notice that the amended return was being audited and requested certain documentation to substantiate the deduction. The taxpayer called the IRS and was told that typically documentation supporting a change should be sent in when amending a return. That just isn't factual. My client was also told that the reason the return was under audit was because the deduction was so big. That may or may not be factual. However, it probably made little to no difference that it was on an amended return versus the original return but that is how the taxpayer perceived it.

The final straw for the taxpayer happened just 33 days later when their employer received a garnishment notice from the IRS for the original tax debt. The garnishment was not within the proper guidelines for collections by the IRS and worse it was attempting to collect a debt on a return that was open for examination. The employer is bound by the garnishment lacking written notice to the contrary. In short, without a written release from the IRS the taxpayer's next paycheck would be garnished. Not to get into the legal stuff here but the IRS was way out of line.

So the taxpayer calls me and is upset because our error has made the IRS audit the return and is at root of all their problems with the IRS. Keep in mind, that the IRS has failed to process a return that has been sent in twice, (even though they cashed the check that was mailed with the first return), misinformed the taxpayer at least three times, and is currently in violation of two of its very own legal processes for collections.

But, I am the bad guy and it is all may fault. Opportunities to get some real help from the service have been blown by the taxpayer. I have not been afforded the opportunity to help resolve the issues but I have messed up the taxpayer's life and I am just the scum of the earth.

You can hear the commercials on most any syndicated talk radio show in America. The pitch goes something like "Settle Your Debt With The IRS For Pennies on The Dollar". Is it possible? Yes it is. It happens all the time. But there are many factors that determine when an IRS debt can be settled.

The method used to settle debt for pennies on the dollar with the IRS is called The Offers in Compromise Program. It is a program offered by the IRS so that honest taxpayers can settle debts that they can not afford to pay. Let me reiterate. The program that can be use to settle debt with the IRS for "Pennies on the Dollar" is called the Offers in Compromise Program. It is designed for honest taxpayers to settle debt that they can not afford to pay.You have to be able to prove that you lack the ability to pay in order to qualify for this program.

This is a reprint from an email I received. It is supposedly advice from an attorney and whether true or not I can see the wisdom in the advice so I am sharing with all that will take the time read.

ATTORNEY's ADVICE - NO CHARGE

Not A Joke!! If you dislike attorneys..... You will love them for these tips.

Read this and make a copy for your files in case you need to refer to it someday. Maybe we should all take some of his advice! A corporate attorney sent the following out to the employees in his company.

1. Do not sign the back of your credit cards. Instead, put 'PHOTO ID REQUIRED.'

The tax rebates for 2008 will happen and the IRS has stated that they will begin sending checks in early May. That is sooner than first projections of late May or early June so give the IRS credit on this.

Rebates will be keyed to tax liability. Married Couples will get a maximum rebate of $1200, single people will get get a maximum of $600. Filers with dependent children under the age of 17 will get an additional $300 per child. Married Couples with at least $3000 in income will get $600 and singles with at least $8750 will get $300. Dependents of another will not receive a check.

I have clients that call and ask me about employee poster requirements in Alabama. It seems that every so often someone that is LESS THAN HONEST sends out a mailing that SCARES the crap out of Employers because the letters look official and they are intentionally trying to make you think that you need the posters to comply with the Alabama tax laws. Well crap, Who could blame you? With all the stuff that employers have to do to comply with Governmental interference, no wonder they get scared that they have possibly missed something. Well I have good news....I just saved 15% on my car insurance. ;-) JUST KIDDING!

President Bush signed a stimulus package into last week and most of the attention has been on the tax rebates for individuals. However, the bill also contains several provisions that should benefit small and midsized companies.

The bill gives companies a 50 percent bonus deduction on new equipment and increases the limit on expensing capital expenditures to $250,000, double the regular $125,000.

The Section 179 expensing and Bonus depreciation provisions of the bill will help small businesses in terms of providing them with cash flow to expand their businesses.